Recovery in the Texas oil and natural gas sector is evident, though yearly indicators suggest there's still ground to make up, an economist in the state said.

Texas is the No. 1 oil producer in the United States. The latest survey from the Federal Reserve Bank of Dallas found mostly upbeat sentiment over the past three months on the back of the increase in permits issued for new oil and gas wells.

Karr Ingham, an economist for the Texas Alliance of Energy Producers, said energy sector developments in the state are in an expansionary cycle because of gains in commodity prices from last year. Elsewhere, however, the sector is still behind where it was last year.

"We still have a long way to go, but 2017 is going to be a year of recovery and expansion in the Texas statewide oil and gas exploration and production economy," he said in a statement. "Activity levels will continue to expand, jobs will continue to be added, and the industry will support the broader state economy again, rather than acting as a drag on growth as it has for the prior two years."

Nevertheless, first quarter data published by Ingham's group show Texas is not yet at peak performance. Crude oil production is down 3 percent and natural gas production is down 7.5 percent from first quarter 2016. The number of Texans employed in the oil and gas industry, meanwhile, is about 6 percent less than the average last year.

Oilfield services company Baker Hughes found that about half of the U.S. rig count, a reflection of exploration and production, took place in Texas last month. The Railroad Commission of Texas, the state's energy regulator, issued 1,310 original drilling permits in March, compared with 511 last year. Both indicators suggest energy companies are willing to spend more on oil and gas opportunities in Texas as the market recovers from last year's slump.

In a potential sign of future production, however, total wells completed for 2017 are down 44 percent year-on-year to 1,925. Wells completed loosely equates to commercial propsectives, with completions indicating an operation is close to actual production.

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